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HB Markets Daily Smallcap Newsflash including: Communisis, Eckoh, Iomart , Proton Power Systems and others

HB Markets Daily Smallcap Newsflash including: Communisis, Eckoh, Iomart , Proton Power Systems and others

@UK (ATUK, 4.375p, £2.84m) has launched an e-procurement package with BarclayCard Commercial that offers participating universities guaranteed cost savings. The launch follows news that the Higher Education Funding Council had earmarked up to £6m for an e-procurement fund, £5m for individual universities to establish an emarketplace and £1m for a generic emarketplace for the 129 Higher Education Institutions. With the funding offers sent to the universities they are about to enter the procurement stage with an estimated £2m- £3m to spend. With clear hope for good news in the short term we move the shares to a HOLD. (Julian Tolley)

Communisis (CMS, 29.0p, £40.19m) The IMS for Q3 ended 30 September 2010, for the marketing services provider, is in line with full year expectations. The Intelligence Driven Communications has continued to grow, with the Specialist Production and Sourcing making good progress. The market forecasts 2010 PBT of £5.8m, EPS of 2.9p and DPS of 1.4p. The stock trades on 10x 2010 earnings falling to 9x in 2011. The prospective yield of 4.8% for 2010 is compelling and a key attraction to the stock.  However, we are not sure whether to the latter is sustainable.   Our key concern is the bill and cheque printing business which is inevitably winding down, driven by Government legislation. We believe the stock is fairly priced and reiterate our HOLD recommendation. (Amisha Chohan)

Cosalt (CSLT, 3.63p, £14.68p)
has confirmed it has had an approach for its Marine business. As we highlighted on the recent offshore division warning the group could be vulnerable to an opportunistic bid – this may be the start of the process. On an ongoing basis we see the group as fairly rated – but the opportunity for outperformance on speculation encourages us to a SPECULATIVE BUY. (Julian Tolley)

Dods Group (DODS, 7p, £10.65m) The takeover talks have terminated – expect short term weakness but we still see value in the UK’s leading political communications group, so we maintain the SPECULATIVE BUY recommendation. (Julian Tolley)

Eckoh (ECK, 7.0p, £13.98m) has secured its first three year contract with RCI Financial Services (subsidiary of Renault S.A), for the provision of payment solution utilising speech recognition technology. We anticipate further contract wins within this field, following the recent accreditation of full compliance with the Payment Card Industry Data Security Standard. We have been buyers of the stock since April 2010. The share price has risen by 33% since then almost reaching our target price of 7.2p. We now believe the stock is fairly valued on 10x 2012 earnings. We believe additional contract wins will support the share price. We adjust our recommendation to a HOLD. (Amisha Chohan)

Geong International (GNG, 37.25p, £14.09m) has reported H1 trading is in-line with expectations. Encouragingly the group has said it increased margins with continued growth in its SaaS business and higher margin business being won in Asia. With forecasts of £2.4m PBT with 5.2p EPS the group is sitting on a modest 7.2x PER – though we maintain the Hold die to concerns on working capital pressures that are primarily caused by the China banks taking up to a year to pay for services. HOLD (Julian Tolley)

Iomart (IOM, 88.5p, £91.63m) has acquired Titan Internet for an initial £3.6m with a deferred of £0.6m payable by 1st April 2011. Titan is a provider of hosted solutions and manages over 1,000 servers. To August 2009 the group had turnover of £3.43m, EBITDA £0.65m and PBT of £0.34m with net assets of £0.77m. Immediately enhancing, before the cost of integration,  this is a sensible move – though the failure to use its highly rated paper is curious. We continue to rate the group a Hold – but with significant unissued capital the group looks well set for a sizable EPS accretive acquisition – so the more adventurous could consider regarding the group as a SPECULATIVE BUY. (Julian Tolley)

Medgenics (MEDG, 9.25p, £14.97m)
A patient has reached 2 years with Medgenics’ biopump system relieving anaemia with a single treatment.  Results are mixed with 2 patients out of 12 being reported as seeing good results but these are only at the Phase I/II trial stage. In addition the group has reported its biopump technology is now producing active clotting factor VIII protein. The market will appreciate this news and with results to be presented to the American Society of Nephrology Annual Convention on the 19th of this month we rate the shares a SPECULATIVE BUY. (Julian Tolley)

Proton Power Systems (PPS, 3.875p, £7.05m) has announced the successful series of tests of its fuel cell range extender for Smiths Electric Vehicles. It will form part of the Smiths Newton, a 7.5 to 12 tonne all electric truck. However there is a second series of tests with the unit installed that will run until Summer 2011 with commercial launch not till the end of 2011. So while this is clearly good news we remain cautious regarding the need for yet further funding - so maintain the SELL recommendation ahead of future dilution. (Julian Tolley)

Tikit Group (TIK, 196.5p, £28.94m), the leading independent provider of IT consultancy, services and technology to legal and accounting firms in the UK, US and mainland Europe, has made two acquisitions, Carpe Diem and PensEra Knowledge Technologies, to strengthen its client offering. Carpe Diem, is a ‘Time and Expense management’ software, used by over 200 law firms.  Tikit paid US$1.35m for the business which generated US$2.2m in annual support revenues for the year ended 30 September 2010. PensEra, the Canadian software company, enables lawyers to recover more billable time wherever and whenever they work. It has in excess of 20,000 new user subscriptions since its launch. Tikit has paid an initial consideration of C$0.73m, with cap deferred consideration payable over three years, for C$0.99m of revenues to 31 July 2010. The bolt-on acquisitions are advantageous operationally, with revenue synergies and opportunities to reduce operational costs. The key benefits will arise from strong recurring revenues, a wider product portfolio, and cross-selling opportunities into a larger client base. Both acquisitions will be a good fit. The market forecasts 2010 PBT of £3.3m, EPS of 17.03p and DPS of 6p. In our view the 2010 PER of 11.5x and 9.5x in 2011 fails to take into consideration the high levels of recurring revenues (53%) and the 22% earnings growth in year one and a prospective yield of 3%. The stock is approaching our target price of 204p, however we reiterate our BUY recommendation and increase our target price to 228p, equivalent to 11x 2011 earnings. (Amisha Chohan)

Vphase (VPHA, 3.25p, £26.07m)
Its power saving technologies have been certified for sale in Australia and New Zealand - a useful expansion of its geographic marketplace. SPECULATIVE BUY (Julian Tolley)

XG Technologies (XGT, 0.16p, £21.98m) Its cellular network technology that takes use of unlicensed spectrum has been licensed for use by Western Datacom (WDC), a designer, developer and manufacturer of hardware and software that secures voice, video and data transmissions over any IP based network. XGT will receive royalties on any unit sold using the xMAX technologies and has given WDC the exclusive right to introduce the technology to a partner which manufactures military smartphone and systems integrator. The military represents a major opportunity for the group and this is clearly good news. However we will maintain a cautious HOLD ahead of probable funding dilution, against our normal sell ahead as we see immediate upside from the technology. (Julian Tolley)

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